The Cost Valuation Model for Reverse Supply Chain using System Dynamics

Abstract

Due to some recent environmental regulations in developed countries, industrial companies are forced to consider recycling systems more seriously. However, there are very few studies on the economic justification on the implementation of recycling systems. In this paper, we propose a model to evaluate the environmental costs of a reverse supply chain. The model uses the concept of ABC(Activity-Based Costing) to assess the cost of each activity in a supply chain and identifies the consumption of resources. We represent a reverse supply chain from a new point of view based on the I/O(Input/Output) structure. A simulation model was developed based on the classic system dynamics concept, and simulation experiments were conducted to validate our model. Enterprises as well as governments can carry out various analyses using the developed model to obtain a better understanding of the strategic and operational aspects of a recycling system.